Meet China's Biggest Oil Trader: At 39, He Generated $38 Billion In Revenue

Tyler Durden's picture

Ye Jianming isn’t a name that rings many bells... yet. But, according to SCMP, it will, considering what he’s achieved so far in a country where the state firms take all. As Fortune recently wrote, when it ranked Ye #2 in its "40 Under 40" list, he runs a $42-billion-a-year oil business in China, (No. 229 on the Fortune Global 500), yet few in China know anything about the mysterious tycoon or the firm he created, CEFC.

Ye bought a collection of oil ­assets in his twenties and ­secured loans from state-owned banks to expand abroad, a privilege for a private company. CEFC has oil agreements in Kazakhstan, Qatar, Abu Dhabi, and Chad and has gone into ventures with state-owned giants to transport oil to China, making him a rare powerful private player aligned with the Chinese government.

Little else is known about Ye: as of this moment, he is the sole private entrepreneur to win a stake in an Abu Dhabi onshore oil concession (whose lifespan is 40 years) with 4%. British Petroleum and China National Petroleum Corp got 10% and 8% respectively.

Why would state giants like CNOOC and Sinopec Group tolerate that? Simple: Ye holds a “full” licence in China’s financial industry – covering insurance, brokerage, banking, trusts, commodities and asset management, alongside state-owned Citic Group and China Everbright Holdings. Yet what’s so different here from the hundreds of firms that are queuing up for an insurance license?

Well, the money helps: his empire, CEFC China Energy, has seen its revenue double to 263 billion yuan (US$38.3 billion) between 2012 and 2015, becoming the largest oil trader in China. That was before the company won a lucrative permit to import oil.

But most important and puzzling of all - according to SCMP - Ye is only 39 years old.

Ye is now venturing into Hong Kong. Last week, he announced the HK$600 million acquisition of listed Runway Global with the intention to make it a financial conglomerate. In October 2016, he paid HK$1.4 billion (US$180 million) for three floors at the Convention & Exhibition Centre in Wanchai. Before putting a price tag on Ye and Runway, one question needs to be satisfied. How did he manage all this? Or rather, who is he?

It’s a mystery.


Ye Jiangming, the 39-year-old CEO of CEFC China Energy

He calls himself Ye Jianming. Mainland media found a different name. He said he started as a forest police officer in a tiny town in Fujian. Local journalists said he was a carpenter. He told Fortune Magazine his business took off in 2006 after buying oil trader Xiamen Huahang at auction, which was once owned by smuggling king Lai Changxing. He was then only 27. He said he was funded by investors in Hong Kong and Fujian.

Domestic newspapers questioned how Xiamen Huahang, which is owned by the Fujian government, was linked to Lai’s circle and ended up in auction. It’s the same dark cloud surrounding almost every high-flying private player from China.

Yet what makes Ye different is the structure of his company; it’s that of a state firm.  The company has a Communist Party Committee, a Disciplinary Committee and a Youth League. It boasts a middle management that largely consists of party members. It set up two think tanks in Hong Kong – China Energy Fund Committee that sponsors events and research advocating China’s territorial claims, and the China Institute of Culture, that pledges its support for Taiwan’s reunification with mainland China.

Add to this a Czech news report that Ye was a deputy secretary general with close associations to the People’s Liberation Army, and speculation runs wild: CEFC is a shadow state firm set up to win deals in sensitive areas; CEFC is a business of the People’s Liberation Army; or Ye is the grandson of revered Marshall Ye Jianying. Ye denied any army links.

No less puzzling is its financing, that doesn’t quite seem to match its fame and connections.

On December 15, its Hong Kong subsidiary borrowed HK$600 million from state-owned Huarong International Financial Holdings to pay for the Convention Centre office. It’s paying 7.5% interest – triple what other commercial banks charge.

On February 18, Huarong said it loaned US$45 million (HK$349 million) to CEFC to fund its US$880 million investment in the Abu Dubai oil concession. That is conditional on CEFC signing a letter of intent with the Hainan branch of the State Development Bank for a loan to pay off the difference. Huarong is charging 8% interest – plus 1% transaction fee – rising to 12% in case of extension beyond six months. That’s almost double the prevailing bank rate.

Ye is also borrowing to acquire Runway. Guotai Junan will provide HK$320 million, or 53% of the acquisition cost. There is no information on whether Ye will pledge his controlling stake in Runway for that loan.

None of these amounts are Big Money. A better question is why a company as "strong" as CEFC, has to rely on loans, which charge far greater than market interest rates, rather than choose cheaper, prevailing market rates at commercial banks.

* * *

While the question swirl, perhaps some answers can emerge in his background.

In a recent piece, Fortune profiled how over the course of just one week last fall, CEFC China Energy became Prague’s hottest investor, buying the Czech Republic’s top soccer club, Slavia Prague; a Czech publishing house; a couple of Renaissance-era historic buildings; one of the country’s oldest breweries; and biggest of all, a controlling interest in Prague’s J&T Finance Group, making CEFC the first private Chinese company to own a European bank. The company’s spending totaled $1.5 billion when all was said and done.

The shopping spree played out against a noteworthy political backdrop. The Czech Republic’s leftist government was encouraging Chinese investment. And China was launching diplomatic efforts to expand its world influence by reviving the old Silk Road trading route through Central Asia into Europe.

CEFC may be privately owned, but in Prague it was a cog in the Chinese government’s plan, and happy to be. In fact, aligning itself with the government has been central to the company's strategy to become China’s newest oil power. CEFC ranks #229 on the Global Fortune 500 list, with $42 billion in revenue in 2015, double its 2012 total.

Its global reach has continued to grow: CEFC now owns a couple thousand European gas stations, many bought from Kazakhstan's state oil company, along with a one-million-ton oil storage system in Spain and France that expands China’s connections with the world oil supply.

Behind the strategy is CEFC’s founder, Ye Jianming, who ranks at No. 2 on the Fortune 40 Under 40 list this year, thanks largely to his company's remarkable recent rise. “We closely follow the national strategies. So we‘ll map out our corporate strategy according to the national ones,” Ye told Fortune this September, in his first interview with a Western media outlet. He speaks matter-of-factly, describing CEFC’s plans the way an American CEO might on a roadshow with investors.

* * *

The 39-year-old Ye stands out as much for the intrigue around him as for his success. He bought oil assets in China while only in his twenties, rarely makes public appearances, and avoids the typical lubricants of Chinese business, alcohol and smoking. Reporters and researchers have also raised questions about about ties between Ye and CEFC and nationalistic elements of China's People's Liberation Army — connections that can confer power and prestige in China, but can make for awkward optics in the eyes of potential partners overseas.

Ye's rise illustrates in vivid terms how tightly aligned China’s government and private companies continue to be, especially when doing business offshore, and also how similar the country’s private companies can look to their state-backed competition.

Ye doesn’t seek publicity for that, he says. He feels more comfortable staying home studying Confucius or Buddhism than attending business dinners, which he avoids by sending lieutenants in his place. He has black eyes, a strong rectangular face free of wrinkles, and swept-back black hair. He speaks quietly and punctuates the end of sentences with a brief silence before a concluding, Ahh.

Ye founded CEFC in his twenties. After a brief stint with the forest police in his home southern province, Fujian, he says he bought oil assets from auction once owned by a businessman named Lai Changxing, who fled to Vancouver in 1999 to avoid arrest after authorities discovered that he ran a large smuggling ring. (Lai was eventually convicted and sentenced in China for smuggling and bribery.) Ye got the funds for the purchase from wealthy investors in Hong Kong and Fujian, a province with a reputation for producing astute businesspeople. Ye pitched to those investors an oil business that would operate alongside China’s state oil companies, in the gaps those companies left open.

At the time, China was hungry for crude, but its state-backed companies were having difficulty closing some deals abroad. The optics of China’s state-backed giants marching into a country to buy and extract oil weren’t great for central Asian politicians. This paved the way for private, under-the-radar firms like Ye’s, which can strike oil deals in Europe and the Middle East where SOEs would bring political liabilities.

CEFC has signed agreements for oil rights or done deals in Kazakhstan, Qatar, Russia, Chad, Angola, and Abu Dhabi, and gone into ventures with China’s state-owned giants to transport oil and gas back to China. CEFC doesn't have the right to sell directly in China, so it either stores the oil or sells it to the market through one of China's SOEs.

After several years of economic malaise in Europe following the 2008 global banking crisis, European energy assets started coming up for sale. “They decided to sell their refineries and gas stations," Ye says. "This wouldn’t happen in China. In China, oil exploration, refining and sales are all monopolized by the SOEs.” CEFC is building an energy storage and logistics system in Europe from its second headquarters in the Czech Republic to create an exchange between China, Europe and the Middle East. That, in turn, serves China’s ambitions to have overseas storage locations connected with world markets. The alignment with Beijing has paid off. CEFC’s won a license to import crude into China in the last year, a potentially lucrative venture. China is the world’s second-largest consumer of crude behind the U.S., but declining profits and margins at the country’s oil SOEs are increasing the pressure for reform.

* * *

CEFC says almost two thirds of its $42 billion in revenues last year came either from the agreements it has with foreign governments to oil rights, the oil and gas transportation networks it runs, or its oil storage business. Its Singapore-based oil-trading desk is also one of the biggest affiliated with a Chinese company. “The Chinese government now wants to reform, and they are inviting independent companies to play a bigger role in the industry,” says Oceana Zhou, a writer at commodities research firm Platts.

Ye’s seldom-used office in Shanghai includes traditional and modern Chinese touches: a three-foot lounging Buddha statue on his desk; an expressionist Mao painting; President Xi Jinping’s framed calligraphy from his time leading Ye's home Fujian province 15 years ago. The office also has three separate desk phones, including a clunky red phone that appears similar to a “red machine,” an encrypted phone service used by the country's largest state-owned companies to keep their conversations secure from prying foreign intelligence agencies. (The company says this phone is actually tied to CEFC’s internal executive line.)

And then there are the military connections.

CEFC’s culture emphasizes military-style regimentation and promotion. In the past, it hired former military officers as consultants and managers. CEFC’s hiring of former military brass and its Communist Party influences can be interpreted a couple different ways. In one, CEFC is a de facto tool for the state to cut deals around the world, which would make it one of many Chinese private companies expanding abroad with the help of unclear government relationships. In the second, CEFC really is a private player, but casts itself as close to the government because it's good for business.

The second explanation appears more probable, though conversations with Ye don't do much to clarify the blurry lines. Ye says CEFC may not even be an oil company in the future, and might instead focus on its fledgling investment bank division, which already has investments in the energy sector. Such a strategy would explain CEFC’s Czech investments. But those same investments were also in tandem with the government’s $4 trillion One Belt One Road foreign investment program.

“We have to look at geopolitics,” Ye says. “If one day the Czech Republic goes against China, we need to pull back our investments to rethink our strategies there.”

In late 2016, Ye also opined on the outcome of the US election: “Once Madame Hillary steps into her office, because she is anti-Russia … oil prices will be coming down,” he says. “Because Mr. Trump is pro-Russia ... if he’s elected the oil price will go up.”

So far, the latter has failed to materialize.

At times, having close links to the government has created tensions for Ye. CEFC runs a think tank called China Energy Fund Committee. One of its analysts was Dai Xu, a former senior air force colonel. Writing under the pen name Long Tao in 2011, Dai advocated using force in the South China Sea, a hot-button issue in those contested international waters, where half a dozen countries claim territorial rights.

But it is Ye’s own potential military ties that have generated the most intrigue. After CEFC’s weeklong investing spree in the Czech Republic, Czech news organizations reported finding an old biography listing Ye as deputy secretary general of an association close to the People’s Liberation Army. That group, the China Association for International Friendly Contact (CAIFC), bills itself as a forum to connect high-level military and political figures in China with those abroad. But it is essentially an influence and propaganda platform, writes Washington, D.C.-based researcher Mark Stokes of the Project 2049 Institute. Stokes says that related departments engage in political warfare, including spreading propaganda and recruiting potential intelligence sources, to serve goals including China’s ultimate aim of reunifying China and Taiwan.

A connection to this group would cast a shadow over the perception of Ye and CEFC in some countries where the company operates. But in conversation with Fortune, Ye denies having such ties. He says he was invited to become a director on CAIFC, but declined. He believes CEFC’s smaller partners in China have tried to inflate his role with the government for their own benefit, which is why his name appeared in the old biographies.

“Actually," he says, "I’ve received invitations from the People’s Congress, the People's Political Consultative Conference, associations related to foreign affairs, the institute of international relations in China….all to undertake some role or duty in their organization.” He says he declined all the invitations.Even without such ties, CEFC's close alliance with the government is likely to continue to generate concern as the company grows. China’s desire to hoard crude oil for its strategic purposes is no secret. And the fresh-faced Ye has positioned himself in the middle of China’s economic and political desires — the exact place he wants to be.

With China set to dominate the global oil market, having surpassed the US as the world's biggest importer of oil, not to mention Ye's grand ambitions to gradually roll up the financial world with Beijing's backing, keep a close eye on the low-profile 39-year old who is quietly becoming one of China's most important people.

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ACP's picture

Soon to be arrested on fraud and corruption charges, no doubt...

AtATrESICI's picture

Part him out...David R. needs a heart...this is his son...

Laowei Gweilo's picture

entirely depends which Chinese party he is associated with :P

don't be fooled by the 'One Party System' or the Anti-Corruption Effort

it's all just Xi Jingping and his 'party' taking out the other party (associated with Bo Xilai)

most of the anti-graft are people assocated to that party

heck, ever remember the Ferrari story? the young rich princeling that crashed his car with 2 naked prostitutes and they all died?

rumour around Beijing (or at least Beijingers not currently IN China lol) is that he almost never drove or partied. he was a nerd. a zhai nan. ??

he did however have strong family connects and influence to the same people bo xilai did.

i mean, who knows. wouldn't be the first princeling to do something stupid. 

but in general the anti-corruption campaign has no genuine goal to rid anti-graft

it's just to convince the public of anti-graft while using it as a convenient way for Xi Jingping to take out opposing views within the Politburo but especially at the city level (which is why they're mostly going after city department chiefs rather than state chiefs).

well, maybe. worth considering at least =p

it'd be the 'smart' thing to do at least because anti-corruption is pretty fruitless anyhow. it just gets replaced with lobbying =p

limited man's picture
limited man (not verified) Laowei Gweilo Feb 25, 2017 4:18 AM

I'm making over $7k a month working part time. I kept hearing other people tell me how much money they can make online so I decided to look into it. Well, it was all true and has totally changed my life. This is what I do... http://bit.ly/2jdTzrM

xythras's picture
xythras (not verified) limited man Feb 25, 2017 6:12 AM
AtATrESICI's picture

They are running a fake anti-corruption campaign. I must say that I am completely shocked...

On a real note I am putting back the pcs. of why I tuned out of following current events the last time. The news is demoralizing (a type of terror campaign) conservatives or classical liberals (normal people) do not have a way to effect any change in the real FAKE WORLD.The only outlet is readying one's self for the culmination of the policies of neoliberalism...BOOM...

I hope Trump keeps doing what he can to expose the Owners, the irony of this is not lost to everyone just most.

Gladi8tor's picture

 

he will be dead and the state will take over his business within 10 years

turnball the banker's picture
turnball the banker (not verified) Feb 24, 2017 8:41 PM

No doubt related to the oil minister

Elco the Constitutionalist's picture
Elco the Constitutionalist (not verified) Feb 24, 2017 8:42 PM

The Chinese sure are good at exploiting the Central Banks ponzi schemes. Must be why Jew leaders have discussed colonizing Asia when they are inevitably expelled from the Occidental.

Quantum Bunk's picture

The Andrew Hall of China. He is nothing.

 

Somebody has to be right. Someone has to guess right. He has and it has nothing to do with his own abilities.

laomei's picture

hey look, a shell company.  this is why there was an exclusion act on chinese in the first place.  

sinbad2's picture

Just a small correction, British Petroleum hasn't existed since it merged with Amoco in 1998, that's why they changed the name to BP.

levelworm's picture

Ye Jianming was probably the successor of Lai Changxing. I believe he is managing the assets for the army, just like Lai. That's the reason he was able to land big contracts from those countries.

uhland62's picture

Whatever. Three things matter, 1. that the Chinese industry has oil to prevent hundreds of millions becoming unemployed and trashing the streets - 2. secondly manage the company properly so there is no or little environmental damage - 3. pay your workers properly.

Who owns it - who cares. It's not so much the Asian way to chestbeat because you have been economically successful. As philanthropic activities are not compulsory it is easier to stay out of the limelight and you don't get harassed. 

bluskyes's picture

Public face of a group of politbureau insiders.

observer2017's picture

How does a forest police know about inside information regarding oil auctions and how does a kid convince wealthy investors to hand him the money?

consider me gone's picture

He is really the villain in the next James Bond movie.

Cardinal Fang's picture

The Chinese are smart, they install military puppets that they don't even need to bug their phone calls...

peterk's picture

FRAUD!.. The guys a front man for  the politicians... The  pollies soon realised that they  could get some nice

state asets and lucrative  licenses in their own pockets, since they are the ones with power

to grant those benefits to state complanies usually.

But they had the problem of being caught for imbezelment in the future, so they decided to put a  front man

 ie a patsy...... and here is the guy.. up front doing nothing, knowing nothing, while

the  commmunist party memners running  the  company grant themselves all the contracts and loans.

.. and eventually divy up the profits.

I suspet most of china operates this way.. rapeing national assets and  using law to grant lisences

and confiscate assets.

Remember, a few years ago the local governmnets would just  confiscate famers  lands, kick them off and sell it the the property

develeopers who were usually their relatives!

Once the debt bubble pops, all the scams will surface good.

Last of the Middle Class's picture

He'll join the rectal bit coin thumb drive express to Manitoba when the going gets rough. You can bet on it.

Davidduke2000's picture

He is a general in the Chinese army, a government worker. 

AlbertthePudding's picture

Here's a question..

 

How many of the Chinese people that invest money around the world, get migration visas and are generally seen in the West living or doing business, are not Chinbese Communist Party members and how many Chinese businesspeople with substantial assets are not senior officials?

Because if the people gaining immigration in our countries, hardworking or not, investors or not, are party members they can be required at any time to act for the Chinese Govt - US passport or not. Now wouldn't that turn out to be a scandal!

 

truthalwayswinsout's picture

Fraud. Everything in China is a con, a scam, or a fraud backed by crony connections with the Communist Party.

mtanimal's picture

Do a search and see if a Rockefeller visited that province about 40 years ago. Might find his mother and who she serviced.

Crony-capitalist-crime front. No mystery here. Licenses == State protection from competition. Forest police officer my ass. The money men needed a clean front man without a criminal record.

GRDguy's picture

A perfect example of how one sells his soul to become an agent of The Great Red Dragon (Money Kings).

"Remarkable" isn't so remarkable when you understand how it's done. 

Almost nothing he "owns" belongs to him personally.